Accounting for Casinos and Gaming Steven M. Bragg
Chapter 1 Gaming Operations... 1 Learning Objectives... 1 Introduction... 1 Types of Games... 1 Casino Organizational Structure... 2 Organization Charts... 2 Job Titles... 4 Physical Organization Casino... 5 Physical Organization Card Room... 6 Table Game Operations... 7 Table Inventory... 7 Fill Transactions... 7 Credit Slip Transactions... 8 Ending Reconciliation... 8 Foreign Chips... 9 Player Rating System... 9 Table Drop Boxes... 9 Slot Machine Operations... 10 Tokens... 11 Slot Clubs... 12 Slot Drop... 12 Hard Drop... 12 Currency Acceptor Drop... 13 Slot Gaming Revenue Calculation... 13 Keno Operations... 13 Race and Sports Book Operations... 14 Bingo Operations... 14 Casino Credit... 14 Markers... 16 Rim Play... 17 Marketing Activities... 17 Cashier Reconciliations... 18 Chapter Summary... 18 Review Questions... 19 Review Answers... 20 Chapter 2 The System of Accounting... 21 Learning Objectives... 21 Introduction... 21 Financial Accounting Basics... 21 Accounting Frameworks... 24 Accounting Principles... 24 The Accounting Cycle... 26 Accounting Transactions... 26 Types of Transaction Cycles... 27 Source Documents... 27 Double Entry Accounting... 28 The Accounting Equation... 29 Journal Entries... 30 The Accruals Concept... 31 The Chart of Accounts... 32 Major Journal Entries... 33 The Ledger Concept... 34 i
Posting to the General Ledger... 35 General Ledger Overview... 35 The Trial Balance... 36 The Trial Balance Format... 36 The Extended Trial Balance... 37 Accrual Basis of Accounting... 38 Chapter Summary... 39 Review Questions... 40 Review Answers... 41 Chapter 3 Gaming-Specific Accounting... 43 Learning Objectives... 43 Introduction... 43 Revenue Recognition... 43 Deferred Revenue... 44 Breakage... 44 Track Fees... 44 Discounts on Losses... 44 Accounting for Jackpots... 44 Jackpot Insurance... 45 Accounting for Unpaid Winners... 45 Loyalty and Incentive Programs... 45 Discretionary Incentives... 45 Nondiscretionary Incentives Cash Redemption Allowed... 46 Nondiscretionary Incentives Free Play Only... 46 Nondiscretionary Incentives Multiple Redemption Options... 47 Reporting Considerations... 47 Promotional Allowances... 47 Advertising... 48 Gaming Chips and Tokens... 48 Licensing and Preopening Costs... 48 Gaming License Costs... 49 Preopening Costs... 49 Tax Impact of Customer Credit... 50 Deferred Income Taxes... 50 Cocktail Service... 50 Transfer Pricing... 51 Coin Booth... 51 Drop Accounting... 51 Chapter Summary... 52 Review Questions... 53 Review Answers... 54 Chapter 4 Payroll Accounting... 55 Learning Objectives... 55 Introduction... 55 Employee Time Tracking... 55 Gross Pay Calculations... 56 Hourly Rate Plan... 56 Overtime... 57 Tips... 58 Types of Payroll Taxes... 59 Social Security Tax... 60 Medicare Tax... 60 Unemployment Taxes... 60 Income Tax Withholdings... 61 Benefits and Other Deductions... 63 ii
Net Pay... 64 Remitting Payroll Taxes... 64 Types of Tax Deposit Schedules... 64 Monthly Deposit Schedule... 65 Semiweekly Deposit Schedule... 65 Federal Unemployment Deposit Schedule... 66 Remittance Method... 66 The Form 941 Quarterly Federal Tax Return... 66 State Tax Remittances... 67 Payments to Employees... 67 The Payroll Register... 68 Form W-2... 70 Payroll Journal Entries... 71 Types of Payroll Journal Entries... 71 Primary Payroll Journal Entry... 71 Accrued Wages... 72 Manual Paycheck Entry... 73 Employee Advances... 73 Accrued Vacation Pay... 74 Tax Deposits... 75 Chapter Summary... 75 Review Questions... 76 Review Answers... 77 Chapter 5 Receivables and Payables Accounting... 79 Learning Objectives... 79 Introduction... 79 Accounting for Accounts Receivable... 79 Collections... 80 Accounting for Bad Debts... 81 Direct Write-Off Method... 81 Allowance for Doubtful Accounts... 82 Accounting for Accounts Payable... 83 The 1099 Vendor... 85 Chapter Summary... 86 Review Questions... 88 Review Answers... 89 Chapter 6 Fixed Asset Accounting... 91 Learning Objectives... 91 Introduction... 91 What are Fixed Assets?... 91 Fixed Asset Classifications... 92 Accounting for Fixed Assets... 93 The Capitalization Limit... 93 The Base Unit... 94 The Initial Measurement of a Fixed Asset... 95 The Purpose of Depreciation... 95 Depreciation Concepts... 96 Accelerated Depreciation... 96 Sum-of-the-Years Digits Method... 97 Double-Declining Balance Method... 97 Straight-Line Method... 98 Units of Activity Method... 98 The Depreciation of Land... 99 The Depreciation of Land Improvements... 99 Depreciation Accounting Entries... 100 iii
Accumulated Depreciation... 100 Asset Impairment... 101 Measurement of Asset Impairment... 101 The Asset to be Tested... 102 Timing of the Impairment Test... 102 Accounting for the Impairment of an Asset Group... 102 Asset Derecognition... 103 Abandoned and Idle Assets... 103 Asset Disposal Accounting... 104 Slot Participation Agreements... 105 Chapter Summary... 105 Review Questions... 106 Review Answers... 107 Chapter 7 Interest Capitalization... 109 Learning Objectives... 109 Introduction... 109 Overview of Capitalized Interest... 109 When to Capitalize Interest... 109 The Interest Capitalization Period... 110 The Capitalization Rate... 111 Calculating Interest Capitalization... 112 Chapter Summary... 113 Review Questions... 114 Review Answers... 115 Chapter 8 Debt Accounting... 117 Learning Objectives... 117 Introduction... 117 Basic Debt Accounting... 117 The Amortization Schedule... 119 Reconciling the Debt Account... 119 Chapter Summary... 120 Review Questions... 121 Review Answers... 122 Chapter 9 Controls and Policies... 123 Learning Objectives... 123 Introduction... 123 Types of Gaming Theft... 123 Accounting Controls... 124 Controls... 124 Comp Controls... 125 Credit Controls... 125 Front Money... 125 Bingo Controls... 126 Keno Controls... 126 Race and Sports Book Controls... 126 Slot Machine Controls... 127 Dealer Controls... 127 Chip and Token Controls... 128 Table Game Controls... 128 Ticket Controls... 129 Collection Controls... 129 Key Access Controls... 129 Count Team Controls... 129 Physical Access Controls... 130 Vault Controls... 130 iv
Supervisor Controls... 130 Surveillance Controls... 131 Form Controls... 131 Information Technology Controls... 131 Money Laundering Controls... 131 Internal Audit... 132 Indicators of Control Weaknesses... 133 Policies... 133 Credit Policy... 133 Credit Write-Off Policy... 133 Fixed Asset Disposal Policy... 134 Jackpot Approval Policy... 134 Winnings Claim Period Policy... 134 Ticket Payout Redemption Period... 134 Chapter Summary... 134 Review Questions... 135 Review Answers... 136 Chapter 10 Financial Reports... 137 Learning Objectives... 137 Introduction... 137 Calculation of Income Statement... 137 The Income Statement... 137 The Balance Sheet... 138 The Statement of Cash Flows... 140 Statement Requirements... 140 Reporting Classifications... 140 The Direct Method... 142 The Indirect Method... 143 Financial Statement Disclosures... 144 Profit Center Reporting... 147 Other Accounting Reports... 147 Chapter Summary... 148 Review Questions... 149 Review Answers... 150 Chapter 11 Reporting Requirements... 151 Learning Objectives... 151 Introduction... 151 Treatment as a Financial Institution... 151 Currency Transaction Report... 152 Suspicious Activity Report... 153 Customer Reporting Avoidance Strategies... 158 Transaction Tracking... 159 Multiple Transaction Log... 159 Check Register... 159 Credit Management System... 159 Player Rating System... 160 Wire Transfer Log... 160 Winnings Reporting Forms... 160 Chapter Summary... 163 Review Questions... 164 Review Answers... 165 Glossary... 167 Index... 171 v